Empire carved up into six units

China's e-commerce giant Alibaba is moving to split its business into six main units covering e-commerce to cloud.

And the company will explore fundraising or initial public offerings for five of the operations.

The six groups are Cloud Intelligence, Taobao Tmall Commerce, Local Services, Cainiao Smart Logistics, Global Digital Commerce and Digital Media and Entertainment.

Each of the six will have its own chief executive and board of directors, while Alibaba will manage the entire group as a holding company.

Daniel Zhang Yong will continue to serve as chairman and chief executive of Alibaba, which will follow a holding company management model, and concurrently serve as CEO of Cloud Intelligence.

International commerce chief Jiang Fan will head up the Global Digital Business unit, while longtime executive Trudy Dai takes up the main Taobao Tmall online shopping division.

Meal delivery will fall under Local Services.

Each business group and other investments will retain the flexibility to raise outside capital and seek an initial public offering, the exception being Taobao Tmall, which handles commerce. It will remain wholly owned by the Alibaba Group.

Shares of Alibaba opened more than 10 percent higher in New York on the news.

"The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready," Zhang remarked.

Each business group, he said, has to tackle the rapid changes in the market, and every Alibaba employee has to "return to the mindset of an entrepreneur."

He said Alibaba will "lighten and thin" its middle and back office functions but did not talk about job cuts.

Alibaba has had previous success with spinoffs.

It calved off Alipay in 2010 - an unpopular move at the time that nonetheless led to the creation of Ant Group.

The fintech affiliate controlled by Alibaba founder Jack Ma Yun was on the verge of staging the world's largest IPO before Beijing pulled the plug.

Fintech giant Ant said in January that it had no plan to go public after Ma gave up his control of the company.

Later in the same week China regulators said Ant and 13 other online platforms were basically done with business rectification, indicating that a series of crackdowns on tech giants including Tencent and Meituan was coming to an end.

But Ant's valuations had been slashed by Fidelity to US$64 billion (HK$499.2 billion) in January from US$235 billion just before its listing was halted in November 2020.

News of the biggest restructuring for the 24-year-old Alibaba came a day after Ma returned to the mainland and amid Beijing signaling repeatedly support for private sectors during the recovery of its Covid-hit economy.

"It does seem something of a coincidence that this is happening just as Ma seems comfortable returning," said Stuart Cole, macro economist at brokerage Equiti Capital. "To me it suggests something that Alibaba has been wanting to do for some time but has been waiting for the opportunity to do so."

themis.qi@singtaonewscorp.com

Editorial: Upbeat now Ma's back in the picture